Innovation policy: the Cinderella of the current debate?

The immediacy and scale of the interrelated public finance and financial system crises have naturally – and rightly -generated the vast bulk of comment and economically informed analysis to date. I wondered whether this reflects an implicit collective judgement that the third part of the government’s soi-disant strategy, namely that related to the role of innovation securing long term economic progress is at best uncontroversial or at worst irrelevant? I seem to recall most reviews of the government’s “Smart Economy” policy document evidencing general scepticism and disappointment that this focus for policy action was, to put it mildly, misplaced in the eye of the fiscal and financial storms by then well underway.

I would argue the need for more critical analysis to be focussed on this area—understandably more so if and when we’re a little surer we’re not going bankrupt tomorrow, and/or have to ritually abase ourselves before the IMF—but nevertheless at some stage.

My concern is that the policy machine keeps working, explicitly rationalising more government expenditure and significant institutional policy shifts (without much apparent economic oversight), by ritually linking of such policies to economic growth.

For example, Science Foundation Ireland today announced the allocation of €24m in respect of five new “Strategic Research Clusters”. There’s a broad debate to be had here, but one wonders whether this (by now unremarkable type of initiative) prompts the question for example whether innovation policy here, is or could become, merely a Trojan horse for old-style ‘picking winners’ industrial policy, particularly at a time when there are no apparent limits to the scale and scope of government intervention which in other contexts is now deemed acceptable.

Much more specifically, is there any concern that the renewed emphasis on commercialisability (and thus at least partial private capture) of outcomes of publicly funded research on the part of the policy makers is in unacknowledged tension with the original public good rationales for the ramping up of publicly funded R&D?

I was prompted in part to raise this kite by Nicholas Craft’s VOX post of July 2008 on ‘learning to love creative destruction’ which concludes in part:

Politicians find it attractive to wax lyrical in support of the “knowledge economy” and rush to adopt targets for R&D spending and participation in tertiary education. This “happy clappy” approach to addressing Europe’s productivity growth shortfall keeps them in the comfort zone. More progress would be made if the dark side of productivity improvement implied by creative destruction – exit of established producers and re-deployment of labour – were accepted and facilitated.